Labour Market Mismatch (Canadiana)

A fault line is splintering Canada’s labour market into those who can’t find work and those who can’t find workers.

There’s no shortage of people looking for work. Some 1.4 million Canadians are unemployed, the jobless rate is still above pre-recession levels and youth unemployment is nearly 14 per cent. Despite this, employers across the country say they can’t find the right workers for all kinds of available jobs.

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At the same time, employers from Newfoundland and Labrador to the Prairies say shortages are constraining their ability to grow, innovate and compete. The Canadian Chamber of Commerce cites a shortage of highly skilled labour as the top barrier for businesses, and the mismatch has recently landed on the radar of policy makers, including central bank Governor Mark Carney.

Structural shifts in the labour market mean “workers in declining industries may not have the skills or experience to match immediately the needs of employers in expanding industries,” Mr. Carney said in a speech last week.

Unemployment is high, even as the number of job vacancies continues to rise, he noted. Indeed, as of December there were 222,000 vacancies across the country, according to Statistics Canada. The Bank of Canada’s business outlook survey, released Monday, showed a slew of employers are struggling to fill positions. The survey showed 27 per cent of firms reported a labour shortage this spring, near a three-year high, though below levels seen last decade.

This last sentence suggests that we've been here before. Ten years ago, Canada was emerging from a mild recession; see here: Cyclical asymmetry in the unemployment rate (a comparison of Canadian and U.S. unemployment rate dynamics). But is it really more of the same, or are things a little different this time?

In the tech hub of Waterloo, Ont., plenty of companies are expanding – or trying to.

“It has always been difficult finding highly qualified scientific and technical personnel,” but the problem has become more acute in recent years, says Brian Doody, CEO of electronics firm Teledyne Dalsa Inc., a company that started as a spinoff from the University of Waterloo.

“The lack of young people pursuing further education in engineering and science and technology, is definitely a strain on our ability to grow,” he said. There are some jobs in some microelectronics disciplines where “we have been looking for people for more than a year.”

It is interesting to see this employer suggesting that the problem has become more acute in recent years. Is this a cyclical or secular phenomenon? Maybe a bit of both?

“The lack of young people pursuing further education in engineering and science and technology, is definitely a strain on our ability to grow,” he said. There are some jobs in some microelectronics disciplines where “we have been looking for people for more than a year.”

Other employers, such as Scott Calver, CFO of trucking firm Trimac Transportation Ltd., say the shortage is serious and getting worse.

Young workers are not as motivated by money as older ones, Mr. Calver said. “The older generation considered that their success was based on the number of hours a week you worked, and how much money you made. The people in their 20s and 30s are not as motivated by money, and they value success on working fewer hours, not longer hours.”

Trimac and other trucking firms are having trouble getting unemployed drivers to move to places where there are jobs. “What is disappointing is how limited Canadians are in their ability to relocate,” Mr. Calver said.

Their ability to relocate? Or their willingness to relocate? If the former, might some policy designed to facilitate mobility be in order?

In any case, does this sound like a problem that can be resolved by an increase in G?

Many of the skill shortages seem to be in manufacturing. After a decade or two of outsourcing/offshoring, it might be that the 'skills base' no longer exists in the US/Canada/UK. This is something that the Bank of England has highlighted. As I recall, they said that it would take longer than they had originally expected for import substitution to occur as the manufacturing capability - which must include labor - no longer existed onshore.

These are all anecdotes: they appear in the business press regularly- boom or bust. It's a standard part of search theory that some vacancies go unfilled, but is this phenomenon larger than it was pre-recession? So far the evidence for this is weak- it usually proceeds from anecdote like the above.

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